Voting "no" at this time on an additional 1% sales tax referendum
ADDED SALES TAX: makes it more difficult to shop local
By Stewart Jones
Laurens County Council Member,
Republican Nominee, House District 14
On March 26th, County Council will vote to send an additional 1% countywide capital improvement sales tax (CPST) to the voters for a referendum vote.
I say “additional” because Laurens County already has a 1% local option sales tax. All too often government looks at taxes in a singular manner. In other words, one level of government usually only looks at what it is taxing and it neglects to look at the overall effect that multiple levels of taxes have whether it be city, county, state or federal government. All of these taxes add up and we should never look at taxation in a singular manner but in a combined manner.
Let's first consider the overall picture of sales taxes in South Carolina, which is the most important aspect of this debate.
The state of South Carolina taxes specific goods and services at 6% in the form of a statewide sales tax. With our economy becoming even more service-oriented, it’s a great time to change the tax structure by lowering this overall sales tax from 6% to a 3% rate, by ending some of the exemptions and flattening the tax. By lowering the state sales tax it would give both counties and municipalities more headroom to increase sales taxes thus granting them the ability to fund necessary needs at the local level.
In 1990, the General Assembly passed Act 391 which allowed for a local option sales tax by county referendum. Laurens County adopted a 1% local options sales tax (LOST) in May of 1999. The 1% LOST is returned to the county by the state with 71% going to property tax rollback (goes toward property taxes). The remaining 29% is divided between the county and municipalities, being optional as new revenue for the county budget. The LOST basically reduces property taxes by offsetting with a sales tax. It should be noted that the local option sales tax has become a fixed part of the county budget and while it is voted on yearly, it would be difficult for the county to ever eliminate this tax because it has become a fixed source of funding for the operating budget.
While many consider a sales or consumption-based tax better than a property tax, we should always remember that all taxes ultimately take from some part of the economy and take someone else's property. Whether we see it or not.
Now as a member of the Laurens County Council, I saw several presentations and heard various proposals over the first regular meetings this year as part of an ongoing series called Laurens County Vision 2040. These presentations consisted of many wants and needs pertaining to Laurens County. Some of the proposals included the construction of a C.A.T.E. Center (Career and Technology Education), an AG Center, a Laurens County park that includes a swimming area at Lake Greenwood, a full restoration of the old Courthouse to its original form with modern upgrades, additional libraries, and other renovations. Laurens County also has many essential and necessary needs for county buildings and infrastructure such as EMS stations, 911 Communications headquarters, a new Law Enforcement Center, roads/bridges and new radio systems for all emergency services. In all, the total estimated cost of these county proposed essential projects surpasses $100,000,000. Many of the requested nonessential proposals have not been fully quantified yet.
The additional 1% CPST has been proposed as the primary source for funding all these projects, and County Council will vote on March 26th to send this 1% CPST to the voters for a referendum vote. While there are definitely some important needs that must be funded, it is equally important that we take into account the total level of taxation imposed upon the county and the potential impacts that these levels of tax increases will have on residents and the economy of Laurens County.
A recent tax study, A Road Map for Tax Reform by the Tax Foundation (https://taxfoundation.org/south-carolina-tax-reform/) highlights how South Carolina currently ranks 34th nationwide on overall sales taxes. As one of their key findings from the 2018 study points out: “sales tax rate differentials can induce consumers to shop across borders or buy products online.”
The presentations held at County Council presented data that showed Laurens County residents eat and shop in Simpsonville and other neighboring areas, it also showed the potential generated funds that could be collected if Laurens County imposed the 1% capital improvement tax for purchases made in the county. However, it must be acknowledged that adding a capital improvement tax will not attract more businesses or restaurants to Laurens County. This additional sales tax cannot be collected from shops or restaurants that are not here, it can only be generated off the businesses that currently reside within the county limits.
This tax increase also won’t give us more opportunities to grow the tax base, add new jobs or incentivize another restaurant, retail store or business to move to Laurens County. Also, the additional tax won’t entice but deter people from shopping in Laurens County, which will make profit margins even slimmer for businesses already struggling.
With the 6% state sales tax and the 1% local option county sales tax, Laurens County has a combined 7% sales tax currently. While an additional countywide 1% capital improvement sales tax doesn’t sound bad on its own, we must look at all the sales taxes that people are paying and not just the additional proposed 1%. With the proposed additional 1% sales tax, we would be up to 8% countywide sales tax.
Incorporated areas and municipalities like the city of Laurens, the city of Clinton and Fountain Inn also have a number of sales taxes for their own needs. For example, most municipalities have a 2% hospitality sales tax on prepared food and beverages. With an 8% base state/countywide sales tax, this would bring sales tax on some purchases in these incorporated areas up to 10%.
This would most likely hit our service-oriented businesses the most.
Now, contrast this with some of our neighboring counties like Greenville, Spartanburg, Greenwood, Newberry, and Anderson do not have a 1% local option sales tax, however, they do have or have had some other types of sales taxes.
For example, Spartanburg County does not have a 1% L.O.S.T. however they recently passed a 1% capital improvement sales tax.
Greenville County has a 2% Hospitality Tax on prepared food and beverages leaving most other items taxed at 6%. Laurens, Abbeville and Union counties do have the 1% local option sales tax.
Interestingly, the counties with a local option sales tax are the ones that have struggled the most in the upstate.
By imposing this additional tax on the businesses and consumers of Laurens County we will stifle our local economy by decreasing our competitiveness and driving businesses and consumers to other counties.
Another big concern that I must address is that essential government infrastructure needs will most likely get priority over the non-essential proposals. I fear that voters may think that if they vote for the 1% CPST then they will get their wanted project. This is, of course, is not the case as the essential government functions and infrastructure like the new law enforcement center, E-911 center, EMS stations, roads and bridge (etc) will most likely be the priority.
In closing, I will vote against the added sales tax for the following reasons: 1. It makes it more difficult to shop local, 2. The way it’s being presented makes voters believe that their project will be completed if the new tax is added and 3. It will make the overall combined sales tax amount 10% for some purchases which will “induce consumers to shop across borders or buy products online.”